Simple and Effective Tax Strategies for Business Owners
Have you heard of the Tax Return Problem?
The Tax Return Problem is a surprisingly common mindset trap among small business owners. When March or April rolls around, they gather their tax documents, take whatever deductions they can, and pay the bill that comes due.
And sure, that works. But it’s far from ideal.
This retroactive approach doesn’t optimize… well… anything. It doesn’t help you reduce taxable income, increase deductions, or claim valuable tax credits. And it certainly doesn’t take advantage of any planning opportunities that exist before year-end.
The solution to the Tax Return Problem is simple: you need a Tax Plan.
A thoughtful, proactive Tax Plan can help you meaningfully reduce your tax bill. Although every business owner’s strategy will be different, there are a few simple tax hacks that you can incorporate into your Tax Plan that could save you thousands.
Hack #1: The Augusta Rule
The Augusta Rule, known as Section 280A, is a tax break that lets homeowners rent their personal residence for up to 14 days per year tax free. This can be especially powerful if you rent your home to your business, because it effectively transfers money from your business to you as an individual — without it being taxed as income. And it will still be deductible to the business as long as:
- The business uses your home for a legitimate business purpose (business meetings, retreats, etc.)
- The rental rate is at fair market value
- The rental is for 14 days or fewer
Hack #2: Bonus Depreciation
The One Big Beautiful Bill Act brought back 100% bonus depreciation. Starting this year, taxpayers can immediately write off the full cost of the following types of asset purchases:
- Equipment
- Vehicles
- Computers
- Office furniture
Section 179 is another depreciation option that businesses can consider. Like bonus depreciation, it lets you fully depreciate asset purchases in the year placed in service. Talk to your tax advisor about whether you should use bonus depreciation, Section 179, or a combination of both.
Hack #3: Prepaid Expenses
If you want to lower your current tax bill, consider prepaying some of your 2026 expenses (like rent, insurance, or marketing costs). Just keep in mind that if you deduct those expenses in 2025, you can’t deduct them again in 2026, so optimizing which year to take those expenses requires some planning and forethought.
Hack #4: Fund Your HSA
Consider funding your Health Savings Account (HSA) to the maximum allowed, which is $4,300 for individuals and $8,550 for families in 2025. HSAs are funded with pre-tax dollars, and earnings grow tax-free — so you save money now, and in the future. And bonus: you can take money from your HSA for medical costs you paid in prior years; you don’t have to take payout in the same year the expense occurred.
Hack #5: Fund One or More 529 Plans
Consider creating and funding a 529 plan, a type of Education Savings Account. Even though you won’t get a federal deduction, you may get a state deduction for your contribution. And as long as you use those funds to pay for qualified education expenses, you won’t pay taxes on those earnings, either.
You can fund one 529 plan for as many beneficiaries as you want. For example, if you have five grandkids, you can establish funds to benefit each grandchild, maxing out contributions for each one. In 2025, the maximum 529 plan contribution is $19,000 (i.e., the annual gift tax exemption).
529 plans are quite versatile. They can be used to:
- Pay for college tuition
- Pay for apprenticeship programs
- Pay for fees, books, supplies, and required equipment
- Pay for K-12 tuition (up to $10,000 per year per student)
- Pay up to $10,000 in student loans per beneficiary, per lifetime (and $10,000 for each of their siblings’ student loans)
Hack #6: Employ Your Kids
Consider hiring your kids. Your business gets a payroll deduction, and your kids don’t have to pay taxes on those earnings since the first $15,750 of their earnings is taxed at 0% (in 2025). But don’t forget: your child must be doing legitimate work for your business.
If you put this money into a high-yield savings account for your kids to access in the future, even better — those wages will compound over time, ultimately earning your child more money in the end.
Hack #7: Home Office Expenses
Don’t overlook the value of a home office deduction. If you use any portion of your house as an office — even if it’s just a small corner or nook of your home — some of your everyday living expenses could be deductible. There are two ways to calculate the home office deduction. One is based on square footage, and another is based on actual expenses. Your accountant can help you select the right method.
Hack #8: Vehicle Deduction
If you use your car for business, you can transform a portion of your driving costs into a deduction. You can do this in one of two ways:
- Mileage deduction: You can deduct 70 cents per business mile driven (in 2025); or
- Actual costs deduction: You can deduct the business portion of actual costs of driving your car, which includes gas, insurance repairs, and depreciation.
If you choose Option 2, consider how powerful a depreciation deduction could be. You may be able to write off a huge chunk of the purchase price of your vehicle with bonus depreciation. And if the vehicle falls under the “heavy vehicle” exemption, you can typically take larger depreciation deductions. But just remember: you can only claim bonus depreciation if you use your vehicle at least 50% of the time for business purposes.
Turn Your Problem into a Plan
We’ve always disliked the term “year-end tax planning.” To us, tax planning shouldn’t be something you cram into the last few weeks of the year — it’s a year-round effort. Fully Accountable CEO Rachel Phillips puts it like this: “It’s time to put a tax plan in place regardless of the size of your business. A tax plan really is the key for you being able to keep growing your business.”
By taking the time to think ahead and apply a strategic plan, you can take advantage of countless planning opportunities to set your business up for success long before tax season gets here.
